2014

Errors and Omissions ( E&O ) Insurance

What is Errors and Omissions Insurance?

No tech professional sets out to complete a job for a client expecting to get sued afterwards. But it happens. Errors and Omissions Insurance is the back-up plan – the ace up your sleeve – that can help your business get out of these situations in one piece.

Whether you own an IT business or act as a freelancer or consultant, Errors & Omissions Insurance (also known as Professional Liability Insurance) is designed to help you when a client is upset with your professional work. It can cover claims that your business…

  • Made mistakes that cost your client time or money or harmed their reputation.
  • Failed to protect your client’s best interests.
  • Gave poor advice or recommendations.
  • Was negligent or failed to meet professional standards.
  • Missed a deadline.

In other words, Errors and Omissions Insurance can help protect you from the cost of a lawsuit if you do a bad job – or if your client thinks you did a bad job.

Read on to see why IT professionals should always have this coverage and what it might cost.

Technology Errors and Omissions Insurance: Balancing the Risk Equation

Take unexpected challenges, technical issues, and communication problems, add clients who don’t understand what you really do, and multiply the whole thing by the increased threat of cybercrime and data breach. You now have an equation which shows everything that can go wrong in an IT job.

Does this mean you need to constantly worry about being sued? Not if you have Errors and Omissions Insurance. When a client or customer claims that your business caused them a financial loss, your E&O policy can help cover the legal costs that arise. These costs could include…

  • Attorneys’ fees.
  • Court costs.
  • Settlements.
  • Judgments, if the case goes to trial and you’re found liable.

Even better, this coverage extends to frivolous claims, too. This means if an angry client makes a false accusation against you and sues, you can call his bluff and get the funds to defend your case and quickly resolve the issue.

Why Do I Need Errors and Omissions Insurance?

Practically every IT professional can benefit from carrying E and O Insurance because of the nature of their work. Consider that:

  • Many clients don’t fully understand the ins and outs of what you do and may hold unreasonable expectations about what you can accomplish. They might sue if they feel misled.
  • Laws concerning technology are still constantly changing and lagging. You may be in the clear one day, and then liable for work you did the next.
  • Large companies have a tendency to sue everyone involved in a project if they experience a financial loss. This means you might get sued even if you’re a subcontractor hired to work on a small, specific part of a much larger job.

Additionally, carrying Errors and Omissions Insurance may even help you acquire new clients. It shows you have the means and resources to take care of a situation, no matter what happens.

Packaged Coverage at Discount Rate

-- with the Business Owner's Policy

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Examples of E & O Lawsuits

Errors and Omissions Insurance can help an IT business in numerous ways:

Omissions Claim

An SEM consultant working with multiple clients forgets about one of her clients when the rest suddenly start demanding a lot more of her attention. After she misses two important deadlines, the forgotten client decides to sue her for breach of contract. Funds from her E&O Insurance pay an attorney to help settle the case.

Advertising Injury / Copyright Infringement Claim

A software developer creates an accounting program for a small retail chain. The chain is later sued by another software company that claims the software developer illegally copied most of the code from its copyrighted program. The chain sues the developer to recoup its losses, and the developer’s Errors and Omissions Insurance kicks in.

Negligence Claim

An IT staffing agency places an installation technician at a telecommunications company. The technician, it turns out, isn’t actually that qualified and causes a lot of damage before anyone notices. The telecommunications company sues the staffing agency, alleging that they were negligent in checking the technician’s background. The agency’s E&O Insurance covers the cost of the lawsuit and the resulting settlement.

Frivolous Lawsuit

A database administrator does his best to help a difficult client and fulfills the terms of his contract. The client, however, doesn’t think the database administrator did enough and sues. The case is dismissed, but not after the administrator has to find a lawyer and get legal paperwork in order. His E & O Insurance covers these costs.

What is the Cost of Errors and Omissions Insurance?

The cost of an E&O policy depends on what your business does, how big it is, where you operate, and more. To get a basic idea, see our page on the cost of Errors and Omissions Insurance. Or, fill out our online application to get a customized quote from multiple insurance carriers.

Errors and Omissions Insurance Related Resources